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Practical manual for Income Tax 2022.

Entities in the income allocation system

Regulations: Art. 31 Regulation Income Tax

Entities under the income attribution regime that carry out economic activities will apply the simplified form of the direct estimation method, unless it is expressly waived, provided that the following requirements are met:

  1. That all its partners, heirs, commoners or participants are natural persons who pay income tax.

  2. That the entity meets the previously mentioned requirements, which determine the application of the modality.

Consequently, the application of the direct estimation method to these entities does not depend on the circumstances that occur individually in each of its members, so the entity may determine its performance in accordance with this method, regardless of the situation of the partners, heirs, co-owners or participants in relation to the activities that they personally carry out.

The waiver of the simplified modality of the direct estimation method must be made by all partners, heirs, commoners or participants. However, the revocation of such resignation does not require unanimity, in accordance with the provisions of the regulations governing the census declaration.

The net income determined by the entity under the income attribution regime will be attributed to the partners, heirs, commoners or participants, according to the rules or agreements applicable in each case and, if these are not reliably recorded by the Administration, it will be attributed in equal parts.

Please note that, with effect for tax periods beginning on or after 1 January 2016, civil companies with commercial purposes are taxpayers of Corporate Tax, and therefore the income attribution regime is no longer applicable to them.